Twin Cities Renters Struggle With Short Supply

August 8, 2011 By 2 Comments

There have been numerous stories recently about the tightening supply of rental housing in the Twin Cities.  The latest story from Star Tribune details the struggles some renters have had in finding a place to rent and reveals to us that the apartment vacancy rate in the Twin Cities is now at an astoundingly low 2.4%.

The housing boom created strong demand for condo conversions, which ate up a lot of rental housing.  Then the housing bust killed demand, financing and developer interest in building more apartments. Now we find ourselves in a tight supply market, which will definitely put added pressure on rent prices, which I suspect will rise further in the coming year.

The strong demand for apartments has also spilled over into rentals of single family homes as well.  Craigslist is bustling with listings for rental homes and it seems that most of theses listings do not last long.  Just under a year ago Twin Cities Realtors got into the rental game in a big way.  In the first 11 months of operation, our local MLS”s rental section shows over 1300 units rented – with nearly all of them being houses, townhouses or condos.  That represents just a tiny fraction of rental units in the Twin Cities but because of the detailed nature of MLS listings, we will soon have far better insight into the single family rental market than we’ve ever had before.

With the huge investor activity currently occurring in our housing market, I believe much of the current shortage of apartment units will be met by investors buying up properties (mostly foreclosures) and renting them out as apartment alternatives.

Filed Under: Community Issues, Landlord, Rentals, Renting

Don’t Buy A House

December 2, 2010 By 2 Comments

I am a real estate salesperson, which means I make money selling homes.  But guess what? Not everyone should buy a home, and I don’t mind telling you that.

The housing market today and for the next couple years will continue to be hampered by foreclosures and short sales but, even more importantly, by a weak job market and tons of homeowners who cannot afford to move from their current homes.  This means that even when the housing market stabilizes and starts to rise, that rise will be heavily tempered by additional homeowners putting their homes on the market for sale.

For every few percent that median sales prices rise, many more current home owners will be in a position to sell and that extra supply will limit future price gains.  Further, interest rates can and will rise.  Even if the rates go up to 6% – still a historically low level, the decrease in purchasing power from today’s levels is huge and will also be a drag on home price appreciation.  There is also talk of changes to tax law that may reduce or eliminate the mortgage interest tax deduction, a sacred cow in the real estate industry and a significant incentive to home ownership.

Given today’s market, unless you can see yourself staying in a home for at least 3-4 years or you can purchase for far less of a mortgage payment than rent, I would suggest you strongly consider renting.  By the time you consider all taxes and fees involved in the purchase and subsequent sale of a home, it costs approximately 8% – 10% of the value of the home just to get into and out of it.  That doesn’t mean you shouldn’t buy, but I believe far more conversations need to happen in this situation to make sure that purchasing a home is the smartest move for you.

All of this is of course an oversimplification of things and I will tell you that every situation is different and should be looked at with careful consideration of what is best given the specifics of that situation.

There are many people who should own homes in today’s market, but the idea that everyone can and should be a homeowner is hopefully one that is gone from the conversation permanently.  There are tons of great things about home ownership and a lot of reasons why some people should be taking advantage of this market today but there are 100′s of articles that talk those things up so I don’t feel the need to regurgitate them here.

Filed Under: Community Issues, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Personal Experiences, Rentals, Renting Tagged With: ,

House/Condo/Townhome Rentals Coming Soon to Twin Cities MLS

August 2, 2010 By Leave a Comment

Twin Cities MLS Rentals Coming Soon!The Minnesota Association of REALTORS is preparing to release standardized forms to allow REALTORS in all of Minnesota to more easily represent both landlords and prospective tenants in leasing situations and simplify transactions across different brokerages.

Further, for those REALTORS serving the St. Cloud, Twin Cities and Western Wisconsin areas, NorthstarMLS is putting the final touches on the computer systems that will permit its members to easily enter for-rent properties into the MLS for searching by other REALTORS and for inclusion in the Broker Reciprocity feeds of brokers that choose to include it – which is what consumers are looking at when they search a broker’s site online.

Many regions of the country have had for-rent properties in their local MLS for many years and while there are companies and real estate agents that have worked the Twin Cities rental market for years, this will be the first time that the Twin Cities has seen a comprehensive and standardized system in place for both consumers and REALTORS to use.

The topic of adding a rental section to the MLS has been brought up in past years – when a few of us again brought up the topic of adding rentals to the MLS late in 2009 it was clear that the time was right.  With the recent decline in home ownership rates the need for rental housing has increased.  Further, many homeowners that needed to move but couldn’t afford to move have become accidental landlords. In recent years we have also seen sites like Craigslist bring much of the renting activity online, though with stories of both success and failure.  Oh yeah, and property rental is one of the specific duties real estate licensees in Minnesota are permitted to perform.  We may be late to the game but I bet you won’t know the difference in 12 months!

What sites like Craigslist lack are some of the strengths of the REALTOR MLS system:

  • Controlled Data Entry – Only members of local Boards of REALTORS are allowed to enter property listings  into the MLS and each of them is bound by the MLS rules as well as the local, state and national Boards of REALTORS rules, including the Code of Ethics.  You don’t hear about Scams with the MLS because access is well controlled and the MLS is the Big Brother of the system and knows exactly who is entering listings.
  • Reliable & Complete Data – REALTORS are required to provide information that is reliable and there is a specified minimum of information required on all listings.
  • Standardized Information – Each listing describes the features of the rental in the same way (formatted fields) which makes searching, narrowing and comparing listings much easier.
  • Reported Transaction Information – When a transaction successfully closes, the REALTOR reports the terms of the transaction to the MLS and that information can be used by REALTORS in the future to build market analysis reports for their clients to help price properties/rents.  The MLS is also used by Appraisers when they are hired to perform appraisals of properties – the rental lease transaction information will be very helpful for Appraisers in valuing investment properties.
  • Wide Distribution – The MLS system is likely one of the most syndicated database types on the planet.  In the Twin Cities there are around 5400 broker/agent web sites where the broker reciprocity data from NorthstarMLS is syndicated.  It will be up to each broker/agent to determine whether they will display rentals, however.  Brokers display this data because they know and trust the source of the information and because of the following:
  • Guaranteed Offer of Compensation - In my opinion the most valuable part of the MLS is the fact that brokers participating in the MLS must provide a specified and upfront guarantee of compensation to a cooperating broker that brings forth a buyer/tenant.  If each property’s commission had to be negotiated in addition to the client’s purchase/lease contract, the process would be far more difficult.  No matter what Google or others do for property listings, without guaranteed commissions they can’t reasonably supplant the MLS system.  REALTORS do a job and want to get paid for their work!

I am excited about the new capabilities and there is so much to talk about related to this new component of the Twin Cities housing market so I will be writing additional posts on the topic in the near future.

Filed Under: Landlord, Rentals, Tenant Tagged With: , , , , ,


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